The Trump administration unveiled what it called the biggest
tax cuts “in history” on Wednesday, in a move that will simplify the US tax
system, slash taxes for businesses large and small – including his own –
eliminate inheritance taxes and set the president on a collision course with
Congress over the likely $2tn-plus cost of the proposal.

Critics immediately called it “basically a huge tax cut for
the rich”.

The plan would cut the US’s individual income tax brackets
from seven to three (10%, 25% and 35%) and slash US corporate tax rates from
35% to 15%. “We have a once-in-a-generation opportunity to do something really
big,” said Gary Cohn, chief economic adviser to Donald Trump. “This is about
growing the economy, creating jobs.”

Cohn and Steven Mnuchin, the treasury secretary, were short
on details of the plan that, if passed, would be the largest overhaul of the US
tax system since the Reagan era. “We are moving as quickly as we can,” said
Mnuchin.

The announcement comes amid a continuing row over Trump’s
own taxes, with members of his own party asking for him to release his returns
before pressing ahead with tax reforms. Trump has long claimed he might release
these documents at the end of what he says is a long-running audit, but Mnuchin
said on Wednesday that the president “has no intention” of releasing his tax
returns to the public.

As well as slashing costs for his own businesses, the new
proposals will also cut the alternative minimum tax (AMT), a tax designed to
stop the super-wealthy from taking so many tax deductions that they avoid
paying anything. Leaked documents have shown that in 2005 Trump paid $31m in
tax thanks to the AMT.

Mnuchin and Cohn were pressed on how Trump would benefit
from the proposals, but they avoided the questions. “What this is about is
creating job and economic growth,” Mnuchin said. He described the proposals as
“the biggest tax cut and the largest tax reform in the history of our country.”

The president will not be the only Trump administration
official to benefit from the tax cuts. His cabinet is the richest in history
and includes several billionaires.

The proposal also gets rid of almost all tax deductions,
including those for state and local taxes. This creates a significant increase
in tax for residents of high-tax states such as California and New York. It
does leave in place existing tax dedications for charitable donations and home
mortgage payments.

Mnuchin refused to commit to whether the tax cuts would end
up being revenue neutral, saying the administration was “working on a lot of
details”. However, he felt confident that the tax cuts “will pay for itself
through growth, reduction of deductions, and closing loopholes”. The treasury
secretary did insist though that “the deficit is a problem and the president is
concerned about that”.

Trump has long heralded tax cuts, particularly on
corporations, as a major component of his economic plan. In his joint address
to Congress in February, the US president previewed his proposals, saying: “My
economic team is developing historic tax reform that will reduce the tax rate
on our companies so they can compete and thrive anywhere and with anyone.” He
added: “It will be a big, big cut.”

But on the campaign trail he also consistently pledged to
cut the US’s $19tn deficit “big-league” and “very quickly”. A
20-percentage-point cut to corporate tax rates alone would add $2.4tn to the
national debt, according to nonpartisan pressure group Americans for Tax
Fairness. Frank Clemente, executive director, called the proposal a “reckless”
plan “for massive tax giveaways to corporations, the wealthy, and his own
family” in return for adding trillions of dollars to the national debt.

“So, how would Trump’s White House make up the shortfall? By
drastic cuts to essential services and lowering the standard of living for
regular American families. Unacceptable,” said Clemente. “The White House line
that ‘tax cuts will pay for themselves’ is a lie that has been debunked
repeatedly, including by the conservative Tax Foundation. We will fight this
tax plan tooth and nail, and we’ll be joined by Americans of all political
stripes in doing so.”

The plan faces significant obstacles because of the need for
Democratic support, and “reconciliation” rules that place strict limits on any
tax cuts that result in increases to the deficit.

The Senate majority leader, Mitch McConnell, indicated on
Tuesday that Republicans would have to use the reconciliation process, which
requires tax cuts to be balanced out with spending cuts. “I think it’s pretty
clear we’re going to have to use a reconciliation vehicle because today’s
Democratic party is very different from the Democratic party in the 80s,”
McConnell said.

In a joint statement with McConnell, his fellow Republicans
House speaker Paul Ryan, House ways and means chair Kevin Brady and Senate
finance chair Orrin Hatch gave cautious praise to the administration’s
proposals. “The principles outlined by the Trump administration today will
serve as critical guideposts for Congress and the administration as we work
together to overhaul the American tax system and ensure middle-class families
and job creators are better positioned for the 21st century economy.”

One notable tax missing from Wednesday’s briefing was the
“border adjustability tax”, a proposal to tax goods imported into and sold in
the United States championed by Ryan.

The tax, backed by House Republicans was supposed to serve
as a means to offset any loss in revenue from corporate tax cuts but ran into
opposition from major corporate interests including retailers and automobile manufacturers.

Trump reportedly abandoned his support for the border
adjustment tax, although his treasury secretary Steve Mnuchin did not
definitely rule it out.

“I don’t think it’s dead,” Cole said of the border
adjustment tax. “I’m very worried about blowing a huge hole in the deficit.”

The tax policy was panned by deficit hawks. The Committee
for a Responsible Federal Budget (CRFB) estimated it would cost between
$3-$7tn, using a baseline estimate of roughly $5.5tn because of its vagueness.

In its analysis, the Trump proposals would “increase debt to
111 percent of Gross Domestic Product (compared to 89 percent of GDP in CBO’s
baseline) by 2027. That would be higher than any time in US history, and no
achievable amount of economic growth could finance it.”

In a scathing statement, the group’s president Maya
McGuineas said: “It seems the administration is using economic growth like
magic beans – the cheap solution to all our problems. But there is no golden
goose at the top of the tax cut beanstalk, just mountains of debt.”

However, David McIntosh, the president of the influential
conservative group Club for Growth, praised it as “massively pro-growth”. He
added: “This is the tax plan that the American people supported when they
elected President Trump, so House Republicans would do well to give it their
full support.”

Democrats condemned the proposals. Senator Bob Casey of
Pennsylvania, who is facing re-election in 2018 in a state that Trump won, said
in a statement: “This scheme is a massive tax giveaway to millionaires,
billionaires and big corporations at the expense of middle-class families in
Pennsylvania.

Dick Durbin of Illinois, the No2 Democrat in the Senate,
said in a statement: “President Trump should release his own tax returns if he
wants to have any credibility in a debate about America’s tax code.”

The plans have split experts. Hunter Blair, budget analyst
at the left-leaning Economic Policy Institute, said the proposals were
“basically a huge tax cut for the rich. ”

“According to the Treasury, 43% of corporate tax is paid for
by the top 1%. We have tried this supply side economics before; trickle down
just doesn’t work,” he said.

Chris Edwards, director of tax policy studies at the
libertarian Cato Institute, said cuts in corporate tax rates in the UK and
Canada had not led to lost revenues. “There is a huge amount of [tax] avoidance
right now and a huge effort to park overseas. That money would come back if
rate